Mark Your Calendar

IRS: Has released the 2015 Publication 509 Tax Calendars. This publication shows the legal holidays for 2015 as well as the general, employer’s and excise tax calendars for the year. It also includes a table showing the semiweekly deposit schedule due dates for 2015.

The legal holidays for 2015 are as follows:

January 1–New Year’s Day

January 19–Birthday of Martin Luther King, Jr./Inauguration Day

February 16–Washington’s Birthday

April 16–District of Columbia Emancipation Day

May 25–Memorial Day

July 3–Independence day is observed

September 7–Labor Day

October 12–Columbus Day

November 11–Veteran’s Day

November 26–Thanksgiving Day

December 25–Christmas Day

 

Remember that a statewide legal holiday does not delay a due date for making a federal tax deposit.

Taking the Time off to Vote

Today is the mid-term elections. And it always puzzles me why we don’t have a better turn-out when it comes to voting in this country. Voting is free, in many places it opens early and stays open late and now we even have early voting as well as absentee ballots. So why doesn’t everyone vote? It is a mystery. But this is a payroll blog not a political one so let’s get on with voting and payroll. By that I mean, what is required of employers when it comes to voting and their employees. Is it mandatory for an employer to allow an employee time off work to vote?

Although most elections are federal in some form or manner there is no federal law that specifies the employer requirements for time off to vote. The federal law protects a person’s right to vote by prohibiting interference with the voting process, including voting, campaigning, or acting as a poll watcher or election official. But actually mandating time off to vote during working hours is another area left up to the individual states. States that have a mandate generally require the employee be given enough time to vote unless there is a certain amount of time available to the employee either before or after the shift to vote. An example of this is for Nebraska which states that the employee must have up to 2 hours unless polls open 2 hours before or after work. This is actually the most common mandate. 15 states require the two hour window. These states include: AK, CO, GA, HI, IL, KS, MD, MA, NE, NM, OK, SD, TX, UT and WA. Six states require a 3 hour window. An example is Arizona which requires up to three hours, unless polls open three hours before or after work. Other states that require the three hour window include IA, MO, TN WI and WV. Two states, AL and WY require only a one hour window and KY and NY have the longest requirements with a four hour window.

But some states are not quite as clear cut on their requirements. For example, NV, mandates “sufficient time” from one to 3 hours depending on the distance from or to the poll. Some states, including AR and CA just state that work hours must be scheduled to allow employees the opportunity to vote. MN requires time necessary to appear at the employee’s polling place, cast a ballot and return to work on the day of the election. MS just requires necessary time to cast a vote. ND encourages employers to provide voting leave when the employee’s regular work schedule conflicts with times polls are open. OH just states “reasonable time”. However many states do not have any provisions concerning voting. These include: CT, DE, DC, FL, ID, IN, LA, ME, MI, MT, NH, NJ, NC, OR, PA, RI and SC. The law in VT permits an employee to be entitled to take an unpaid leave from employment to attend his or her annual town meeting. While VA does not specify a time limit but looks to the starting and ending times of the workday on voting day.

It is important to determine and follow the requirements when it comes to allowing employees time off to vote.

Friday is Round Up Day!

When it comes to updates to payroll not all are created equal but all are important–Some, just not right now. Updates to pension plans or the social security wage base—those we want and need to know right now. But other items, I need them but in the next week or so will do. These include items like SUI wage bases and rates, minimum wage updates for next year, and withholding tax tables for next year being released just to name a few. I have already blogged on the fact that I was holding on to the SUI wage bases and doing a once a week blog on them only. But as for the others, well let’s face doing a blog on “the minimum wage increased in Arizona” results in a very short blog. So I am expanding. What will now be known as our Friday is Round Up Day (yes those of you whose childhood goes that far back will remember that from a “certain mouse’s club’s” daily afternoon show) I will list the roundup from the states of such items as withholding tables, SUI wage bases, minimum wage increases or changes, filing electronically changes, same sex marriages updates, etc. I hope you find it informative. If you want these faster than weekly please sign up for our Facebook, Twitter or LinkedIn updates as it will be posted daily there as they come in.

 

Alabama: Just a reminder effective October 20, 2014 all employers submitting 25 or more Forms W-2 must submit such information and Form A-3 electronically through the Department’s website. This is down from 50 in past years.

Arkansas: 2015 Withholding tax tables issued and available on the Department of Finance and Administration website

Florida: The minimum for 2015 will be $8.05.

Maryland: The withholding tables will not change for wages paid on and after January 1, 2015. For 2015 employers will use the same fourteen withholding brackets.

Missouri: 2015 SUI wage base and rates will remain the same as 2014, $13,000. The voluntary contribution deadline is January 15, 2015.

New York: Yonkers is revising the income tax withholding tables for wages paid after 1-1-15. The supplemental rates will be:

Yonkers resident: 1.61135%

Nonresident: .050%

The resident rate decreases from the 2014 rate of 1.84704%

copy of rule making

North Carolina: As the result of recent court rulings that overturned the state’s ban on same-gender marriage, the North Carolina Department of Revenue issued a directive providing for new income tax filing procedures for affected individuals. Employers should note that the directive states that North Carolina employees who have entered into a same-gender marriage must furnish to you a new Form NC-4 or NC-4 EZ.

2015 Inflation Adjusted Items from the IRS

The IRS has finally released Revenue Procedure 2014-61. This is the one we have been waiting for that gives us the items that are adjusted for inflation each year but are not pension plan related. This includes such items as transportation fringe benefits, adoption credit, and the foreign earned income exclusion amount. Here are the 2015 rates in the order they appear in the procedures:

Adoption credit: $13,400

Cafeteria Plans: FSA limit $2,550. This is up from $2,500 for 2014

Qualified Transportation Fringe Benefits: These rates are not changed from 2014. Parking remains $250 and transit passes remain $130.

Medical Savings Accounts:

 

Type of Coverage MinimumAnnualDeductible MaximumAnnualDeductible MaximumAnnualOut-of-Pocket

Expenses

Self-only $2,200 $3,300 $4,450
Family $4,450 $6,650 $8,150

 

Foreign Earned Income Exclusion: $100,800

There are many other items listed in the revenue procedure that may be of interest to payroll professionals that we don’t cover here. To review the procedure itself click here.

Overtime Rules: Some are still working on the basics

When I decided to start blogging I had to make a decision. Do I just blog the updates or do I take on issues that I feel are important.  I made the decision that I would from time to time, when I had a slow news day, take on issues that I feel are important from a payroll point of view.  And today is one of those days.  Overtime is a basic right for the workers of this country and has been for over 75 years. Yet, it still never ceases to amaze me how many companies in this country still do not understand the basics of calculating overtime and paying employees properly. The law (FLSA) currently requires that an employee must be paid 1 1/2 times their regular rate of pay for all hours worked in excess of 40 hours in a workweek. When Secretary of Labor Francis Perkins worked on getting the FLSA passed back in 1938 she basically created the term regular rate of pay.  It never actually meant the rate at which you are normally paid–but was a combination of many different factors to arrive at the rate.  For example if an employee is paid $10 an hour normally and gets a bonus or a sales commission the overtime is not going to be based on $10.00 an hour but a calculated rate that takes this type of payment into account. That portion of the law has not been altered or changed in any way since 1938.  And according to the latest press release from the Department of Labor (DOL) another company–in this case AT&T Prime Communications LP has also gotten a public lesson on how to calculate overtime. And after this math lesson the company paid $122,254 in back wages to 255 employees.  In their press release on the investigation the DOL wrote: “This was a systemic, corporatewide issue that affected workers throughout the country,” said Cynthia Watson, regional administrator for the Wage and Hour Division in the Southwest. “The FLSA has been in effect for 75 years, and employers are responsible for knowing and following the laws that apply to their businesses.”

And that is the way I feel.  Overtime is not some new law that we are still working out the nuances of and it will take a while.  I would find it remarkable if there were still a lot of people working in a company or in charge of one that was alive and working  prior to the FLSA going into effect. We all grew up working under it. So come on employers out there–get the basics of overtime right.  It is the least you can do for your workers and for yourselves.  Remember along with those back wages can come penalties, fines and interest!

What Goes Around Comes Around

Processing Forms W-2 has been a staple of payroll life. Only a very few changes have occurred to the timetable for processing of the forms in the 37 year ends I have completed. The due date to the employee is on or before January 31st and currently they must be submitted to the Social Security Administration (SSA) by the last day in February if filed on paper and by the last day in March if filed electronically. With the invention of electronic filing the SSA wanted to encourage less paper and more electronic filing so it extended the then due date for all of the last day in February to the last day in March.  More time is the reward for filing electronically.  But that might be about to change.  It appears that this extended deadline may be the cause of excessive tax fraud.  The US General Accountability Office (GAO) has issued a report to Congress on this “large, evolving threat” that has been estimated at over $5.2 billion a year.  This tax fraud involves the filing of bogus tax returns with bogus Forms W-2 claiming nonexistent tax refunds using identity theft.  By the time the IRS gets the info from the SSA the fraud is done. But there is a movement in Congress to prevent this fraud going forward.  And that movement is simple.  Scale back the due date for filing electronic Forms W-2 to the SSA and get rid of the paper filing. For electronic filers, instead of allowing the extra two months using the March 31st due date, make the due date January 31st for both giving to the employees and filing to the SSA.  In combination with this, lower the threshold for filing on paper from the current 250 form limit to 20 by 2016.  Of course filing with SSA by January 31st may be unreasonable so the alternate date being proposed is February 15th.

And it isn’t just the feds looking into changing filing requirements including the due dates.  The states are also addressing this issue.  For example, Alabama is currently proposing the January 31st deadline move from the current February 28th date as of the 2015 Forms W-2 filed in 2016.  Nebraska has the due date to the state of February 1st but is proposing moving the current February 15th  due date to the employee to February 1st as well. In addition, the states are way ahead of the feds when it comes to lowering the paper filing thresholds.  While the fed has remained steadfast at 250 many of the states have already reduced the paper filing from the used to be norm of less than 250 (Illinois) to 100 (Kentucky) to 50 (Massachusetts) to 25 (Mississippi) to even 10 (Minnesota).

The gist of these proposed changes is simple.  Times are moving forward and what worked in the past doesn’t necessarily work in the future and payroll must prepare for these changes.

 

NY Is Going Electronic in 2015

The trend for 2015 is for states to require employers to file, report, and/or deposit electronically using their website in most cases.  The latest is New York.  Electronic filing is mandatory for withholding tax filings NYS-45 and NYS-1 for 2015.

For withholding tax returns due on or after April 30, 2015, you must electronically file and pay your withholding tax returns electronically.  Filers of paper returns may be subject to penalties and delays in processing.

The department offers three methods for electronically filing withholding tax returns:

  • Tax Department Web File – You can make withholding payments, file withholding tax returns, and report wage and UI (unemployment insurance) information.
  • Tax Department Web upload – The fastest and easiest way to make withholding payments, file returns, and report withholding tax, wage, and UI information.
  • FSET compatible software – Some commercially available software allows you to use the FSET (Federal/State Employment Taxes) program to file withholding returns and report wage and UI information.

For more information see the department’s website

2015 Social Security Wage Base–The Details

Yesterday I very quickly posted the 2015 social security wage base within a half hour after it was released by the SSA to make sure my readers got it as soon as possible.  But now I want to take the time to do all the math for you so you have all the details for the 2015.  First, again, the 2015 social security wage base is $118,500. This is up $1,500 from the current base of $117,000.  The rate does not change. It will still be 6.2% for employees and 6.2% for employer unless Congress passes legislation during its lame duck session after the November elections.  The maximum tax that can be deducted in 2015 is $7,347.00.  That is up $93 from this year.

The Medicare rate also remains 1.45 percent for both employees and employers and there is no wage limit.  The Additional Medicare Tax still kicks in at $200,000 in wages and still has a rate of 0.9% paid by the employee only.

IRS Releases Pension Plan Limits for 2015

The IRS today announced the 2015 pension plan limits. They are as follows:

  • Employee elective deferral will increase to $18,000 up from $17,500 for this year
  • Catch up contributions for employees 50 and over will actually increase this year to $6,000 up from $5,500
  • Limit on defined contribution plans will increase to $53,000 up from $52,000 for this year
  • Annual compensation limit will increase to $265,000 up from $260,000
  • Definition of highly compensated employee will increase to $120,000 up from $115,000 for this year

For those of you who need the full information on all the various limits please see attached pdf.  IRS 2015 Pension Plan Limitations Complete Text

 

Transportation Benefits: The Road is Starting to be More Traveled

It looks like we have a new movement afoot, shall I say.  Although under the 2013 U.S. Bureau of Labor Statistics National Compensation Survey  less than six percent of private sector employees have access to subsidized commuting that is available under the Internal Revenue Code.  But this may be changing. Cities are starting to mandate transit benefits to help out employees in that city. The latest is New York City whose Mayor Bill de Blasio signed into law a requirement that employers with 20 or more employees give their full-time New York City employees an option to purchase their transit benefits with pre-tax dollars.  The law was signed on October 20th and is effective January 1, 2016. It does not apply to parking benefits and there are civil penalties.  New York is the third city to enact such legislation. Washington D.C.’s mandate will take effect also in January 2016.  But the first city to do so was, of course, San Francisco, CA.  That ordinance was passed and effective in 2009.  All these cities impose the mandate on employers with 20 or more employees. The purpose of these mandates is to give the employees tax breaks on commuting already worked into the Internal Revenue Code but not readily available unless an employer offers it to them.  For example, according to the organization Riders Alliance if an employee uses the current pre-tax level of $130 per month, the New York City employee could save an average of $443 in taxes each year by buying the Metrocard (cost is $112) through an employer.  If you calculate the benefit out across the board any employee who buys the transit passes through their employer and uses the full $130 could save $514 per year in taxes.  And it doesn’t cost the employer anything either. In fact it could save them money according to Riders Alliance since offering the benefit could save the employer $103 per employee per year using the same $112 Metrocard.

And it may not be just cities who are imposing these mandates.  Air Quality Management Boards are also looking into this type of mandate to reduce traffic and improve air quality.   The first one so far is the San Francisco Bay Area Air Quality Management District.  San Francisco Bay Area employers with 50 or more full-time employees within their district’s geographical boundaries are required to register and offer pre-tax commuter benefits to their employees.  This became effective last month (September 30, 2014).

So be prepared and keep your eyes open as more cities and other entities look at this type of program.  Unfortunately, although the tax law that permits these types of savings is on the federal level, the mandates never comes on the federal level. Unlike other countries who mandate these types of national benefits on the national level the U.S. does not.  The result is that employers will have to work through hodgepodges of separate entities with separate requirements.  Information on each of the mandates is provided below.

New York City

San Francisco (City)

San Francisco Bay Area

Washington D.C